There are around 10,000 vessels registered with Croatian customs, according to the nautical industry. On 1st July 2013, Croatia will become a member of the European Union and EU yacht owners based in Croatia will be forced to put their vessels into free circulation. In order to do this, owners must pay the customs duties as well as VAT as defined by the EU Customs Union – set at a rate of 25% (from 1st June).

Porto Montenegro Marina situated in the beautiful Mediterranean yacht charter destination - Montenegro, providing particularly favourable import regulations and lower fixed tax rates

In response to these changes, and considering the high number of yachts in the country, the Croatian government have been forced to incentivise yachts to stay and are currently putting temporarily admitted yachts into free circulation at a reduced tax rate of 5%. However, this rate is due to expire on the 31st May and requires the yacht to be entered in Croatian registers and placed under the Croatian flag.

This is good news for those who have already paid their customs duty prior to Croatia joining the EU, these vessels will automatically acquire the status of Community goods (EU goods) as of 1st July. Those vessels that do decide to stay in Croatia face extensive paperwork in order to pass import customs clearance and entry into the Croatian Register. It can take up to twenty days to gather all the necessary documentation required to register one boat.

As the summer season gets closer owners have been left questioning where they should register their vessels, and which flag it is most beneficial to sail under. In making these vital decisions the dominant consideration is cost, with many looking to register their vessel wherever it is cheapest. For some, particularly charters, countries outside of the EU pose attractive benefits in terms of tax and import regulations. Montenegro’s yacht-friendly legislation for example offers particularly favourable import regulations, lower fixed tax rates on purchases and income, as well as tax and duty free fuel.

These cost advantages combined with yacht-friendly legislation suggest the second half of 2013 will likely see an exodus of boats into outside EU waters.